Automotive News - January 14, 2008 - (Page 18) 18 • JANUARY 14, 2008 finance & insurance SouthwestRe offers GAP coverage ALBUQUERQUE, N.M. — SouthwestRe, a vendor of finance and insurance products, now offers guaranteed automotive protection insurance. GAP coverage makes up the difference between the balance on a vehicle consumer loan and the insurance payment when a car or truck is wrecked or stolen. General Fidelity Insurance Co., a subsidiary of Bank of America, is underwriting SouthwestRe’s GAP program. General Fidelity’s life insurance affiliate underwrites credit insurance provided by SouthwestRe. SouthwestRe, of Albuquerque, also markets F&I products under the First Automotive name. SouthwestRe works with more than 3,000 U.S. auto dealerships. how much they can pay each month on a vehicle loan or lease and compare terms from multiple creditors. It also tells vehicle buyers how to obtain credit reports and work with dealership F&I departments. The brochure is available at www.afsaef.org. Service contract vendor leaves dealers on the hook Donna Harris dharris@crain.com Ohio Attorney General Marc Dann will mediate claims for consumers. The state also could sue Ultimate Warranty on behalf of consumers. Daimler Financial expands DETROIT — Daimler Financial Services America is building a customer service and dealer credit operations center in Fort Worth, Texas. The center, scheduled to open this summer, will handle operations for Mercedes-Benz Financial and Daimler Truck Financial.The center will have as many as 800 employees. It will combine Mercedes-Benz Financial operations in Westlake, Texas, with a Daimler Truck Financial business unit in suburban Chicago. Klaus Entenman, CEO of Daimler Financial Services America, says the center will strengthen Mercedes-Benz Financial’s presence in Texas. Daimler Financial, of suburban Detroit, provides floorplanning and retail financing for U.S. Mercedes-Benz dealers. Ultimate Warranty Corp., a vendor of vehicle service plans, has stopped honoring thousands of contracts. As a result, more than 1,800 U.S. auto dealerships could be forced to assume $48 million in customers’ repair claims. The service contracts hold Ultimate Warranty, of Cleveland, responsible for paying claims. The company’s insurer — Capital Assurance Risk Retention Group, of Charleston, S.C. — was supposed to cover repair costs if Ultimate went broke. Ultimate timeline Events in the history of service contract administrator Ultimate Warranty Corp. Dec. 31, 1996: Company incorporates in Ohio Dec. 31, 2005: Company reports $12 million shortfall in money set aside to pay claims. South Carolina Department of Insurance orders Ultimate to eliminate shortfall Dec. 31, 2006: Shortfall grows to $19.5 million Aug. 31, 2007: After 2 extensions, company fails to file required financial report with South Carolina insurance director Sept. 7, 2007: Company exhausts loss reserve funds Sept. 27, 2007: Company seeks money from its insurer, Capital Assurance Risk Retention Group, to continue operations Oct. 31, 2007: South Carolina court places Capital Assurance Risk Retention Group in receivership; insurer comes under state’s control. Court bars Ultimate Warranty from writing new business 137,000 outstanding service contracts on new and used vehicles. Many of those plans have seven-year terms. Ultimate sold the contracts Money woes But the insurer lacks the money to handle Ultimate Warranty’s liabilities. South Carolina Insurance Director Scott Richardson is asking dealers to cover the service contract claims to help keep Capital Assurance solvent. Last October, a South Carolina court placed Capital Assurance Risk Retention Group in receivership. The state Insurance Department took over the company to restructure it. “The insurer has $7 million, far short of the $48 million needed to cover claims over the next seven years,” says Doug Hartz, the courtappointed deputy receiver. through dealerships across the country, mostly in the upper Midwest and Pacific Northwest, Hartz says. The South Carolina Insurance Department is monitoring claims on Ultimate Warranty service contracts. The department hired a third-party claims service to staff the company’s call center. Ultimate Warranty officials could not be reached for comment. 241 complaints The Ohio Attorney General’s Office says it has received 241 consumer complaints about Ultimate Warranty, most of them filed last year. The company has been in business since 1996. State Attorney General Marc Dann will mediate claims for consumers, says spokeswoman Michelle Gatchell. The state also could sue Ultimate Warranty on behalf of consumers. Gatchell declined to say whether the department is considering that option. Kia captive opens center ATLANTA — Kia Motor Finance Co. has opened a regional service center in Austella, Ga., a suburb of Atlanta. The center will provide retail credit and finance services for Kia dealers in Southern and Eastern states. Kia Motor Finance is the captive finance company of Kia Motors America Inc. Universal launches Web feature OMAHA, Neb. — Universal Warranty Corp., a unit of GMAC Insurance, has a new Web feature that it says will speed up the processing of vehicle service contracts. Universal Warranty says the feature, Sales Driver, merges many of the steps of buying a service contract into a single online application. Those steps include providing price quotes and printed forms. The company says the tool reduces clerical errors and customers’ return trips to the dealership. Universal Warranty, of Omaha, administers service contracts for U.S. dealerships. Other companies OK Capital insures seven other aftermarket warranty administrators: Extended Auto Warranty, Warrentech Automotive Inc., Ultimate Warranty of Arizona, Ultimate Warranty of Wisconsin, First Warranty Group, Warranty America LLC and Mechanical Breakdown Administrators. So far, Hartz says, those companies have money to pay claims on the warranties they administer. Last September, Ultimate Warranty depleted $48 million it had set aside to cover repairs, according to legal records. The company has about Wary manager Arch Abraham Nissan, of Sheffield Lake, Ohio, sold service contracts administered by Ultimate Warranty. Dan Walker, the dealership’s finance and insurance manager, says he has become wary of selling independent aftermarket contracts. “I don’t have the time or energy to research warranty administrators,” Walker says. “It’s easier to stick with the manufacturer’s extended service contracts.” c Brochure offered in Spanish WASHINGTON — The National Automobile Dealers Association and American Financial Services Association have published a Spanish-language version of their brochure Understanding Vehicle Finance. The brochure offers worksheets that help consumers determine Will your Credit Insurance Study: More car buyers choose company exit the business to get financing on the Internet and leave you high and dry? Ryan Beene rbeene@crain.com CARDIF INSURANCE • Credit related insurance is all we do so you know we’re in this business for the long haul. • We have a Life company and a P&C company. • Financial Strength – Our ultimate parent company has over $1.9 Trillion in assets. Mike Casale – President (877) 522-7343 mike.casale@cardifus.com The share of new-vehicle buyers who study financing options on the Internet is declining, a new study says. But the percentage of customers who apply for loans online after they do such research is rising, the study adds. These findings are included in J.D. Power and Associates’ 2007 Consumer Financing Satisfaction Study. They suggest that vehicle buyers increasingly are using the Web to handle sales transactions rather than merely to browse, Power officials say. Power surveyed 24,163 consumers who financed a new vehicle last year. Fewer than one in four said they went online to study options for indirect financing — loans arranged through J.D. Power’s Richard Howse: Buyers may prefer “the convenience aspects that the Internet brings.” dealerships. That share was down from more than a third in 2004. At the same time, the study said, 14 percent of buyers who did such research in 2007 applied for financing online, up from 12 percent in 2004. And nearly half of the survey respondents who used the Internet to research direct loans by auto lenders said they applied for financing online, up from a third in 2005. Richard Howse, who directs Pow- er’s automotive finance practice, said vehicle buyers appear to be “feeling more comfortable with sharing their personal information online and may also prefer the convenience aspects that the Internet brings.” Michael Demech, finance director at BMW of South Atlanta, says the number of customers at his dealership who use the Internet for financing has risen by 75 percent over the past two years. “It is a medium for lots of people to achieve what they want to without the headache,” Demech told Automotive News. “It gives consumers a lot more power to know where they stand, before they even come to the dealership. It’s definitely a good thing. You’ll see a lot more of it in the future.” c http://www.afsaef.org
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